Revised NDRC Measures for Approval and Filing of Outbound Investment Projects

Publication | April 24, 2014

The National Development and Reform Commission (NDRC) released a new set of Management Measures for Approval and Filing of Outbound Investment Projects (境外投资项目核准和备案管理办法) (New Measures) on 8 April 2014. The New Measures take effect on 8 May 2014 and will replace the Interim Management Measures for Approval of Outbound Investment Projects (境外投资项目核准暂行管理办法) (Original Measures) which have been in force since 9 October 2004.

The following major changes have been introduced by the New Measures:

1. Significant increase in the thresholds for central approval

The New Measures set out specific approval/filing requirements for projects in “sensitive countries/regions” and “sensitive industries”. These have been respectively defined as “countries/regions which do not have diplomatic relations with China, or are subject to international sanctions, or are involved in war or civil strife” and “industries such as basic telecommunication, cross-border water resources exploitation, large scale land development, power grid and media”. The New Measures also remove the approval/filing requirements on any further investment by existing offshore entities of Chinese investors if such further investment does not need to be financed or secured by its Chinese investors.

An illustrative comparison between the thresholds and approval/filing authorities for outbound investment projects under the New Measures and the Original Measures is set out below:

New ThresholdsOriginal ThresholdsApproval/Filing Authorities
Projects involving a sensitive country/region or a sensitive industry with at least USD 2 billion of investmentResource development projects with at least USD 200 million of investmentState Council approval after review by Central NDRC
N/AProjects in other industries with at least USD 50 million of foreign exchange investmentState Council approval after review by Central NDRC

Projects involving a sensitive country/region or a sensitive industry, regardless of the investment amount,

OR

projects with at least USD 1 billion of investment

Resource development projects with investment between USD 30 million and USD 200 million,

OR

projects in other industries with foreign exchange investment between USD 10 million and USD 50 million

Central NDRC approval

Projects by central government managed enterprises with less than USD 1 billion of investment,

OR

projects by local enterprises with investment between USD 300 million and USD 1 billion

Resource development projects of enterprises managed by the central government with less than USD 30 million of investment,

OR

projects in other industries with less than USD 10 million of foreign exchange investment

Central NDRC filing
N/A

Resource development projects with less than USD 30 million of investment,

OR

projects in other industries with less than USD 10 million of foreign exchange investment

Provincial NDRC approval
Projects by local enterprises with less than USD 300 million of investmentN/AProvincial NDRC filing

2. New monetary threshold for reporting proposed outbound acquisitions or biddings

The New Measures require that any proposed outbound acquisition or bidding by Chinese investor(s) with at least USD 300 million of investment must be reported to the Central NDRC before “carrying out any substantial work” (as defined below). The Central NDRC will issue a confirmation letter within seven working days if it believes that the project is in line with the national outbound investment policies.

According to the New Measures, “carrying out substantial work” in relation to an outbound acquisition refers to the signing of a definitive agreement, submission of a binding offer and the application for regulatory approval in the target jurisdiction. In relation to outbound bidding, the term refers to the submission of formal bidding documents.

In comparison, there is no monetary threshold for the reporting obligations under the Original Measures.

3. Making NDRC approval/filing a condition precedent in transactions

Under the Original Measures, Chinese investors needed to obtain NDRC approval/filing before entering into any legally binding documents with respect to a project. The New Measures now allow the parties to make the NDRC approval/filing a condition precedent to the effectiveness of the documents and thereby enable the parties to enter into the transaction documents first.

The key amendments described above indicate the government’s clear intention to relax its control over outbound investments and will certainly help Chinese enterprises in “going global” with their ventures.

For further information, please contact Sun Hong or Grace Ye.


Contacts

Sun Hong

Sun Hong

Shanghai